Purchase contract should determine what rights buyer has in tax dispute
Mr. Feichthaler: I bought a spec house in September in Cape Coral. Taxes were prorated so that I received a credit on the settlement statement for the taxes that were expected to be charged in November, then I would pay the full amount of taxes due later. The title company used the 2014 tax bill to determine the amount I would be credited, since 2015 was not yet available. Apparently, the value of the house was not on the 2014 bill, because the new tax bill was five times what was expected! Do I have any rights?
– Chris B.
Dear Chris: The first step in determining what rights you have is in the sale and purchase contract you had with the seller. Typically, the contract will provide detail on what should be done in certain situations for purposes of tax proration. Generally, if the new TRIM notice and tax bills are unavailable, the previous year’s bill would be used to estimate the next year’s taxes. However, both you and the seller knew this was a spec house, and that the tax bill was artificially low for the value of the house on the property. All standard terms of a contract can be amended prior to signing. In this case, it would have been advisable to estimate the new taxable value and apply the estimated tax rate to it. It may not be exact, but it will be much closer than the number you were provided.
Most contracts provide that, if the taxes are different when issued than the estimate, that the parties agree to “Re-prorate.” In this case, this will require the seller to provide you the difference (which could be hundreds or even thousands of dollars) so the credit will be accurate. This is reasonable, since the seller held the improved property from Jan.1 through your closing date in September. It should be expected that the seller will pay taxes for the time that he or she held the property.
Be aware that some contracts may provide for no proration, and that the settlement statement is the final accepted numbers and credits. If that is the case here, you may have no recourse. Also, you will want to review the other documents the title company gave you.
At our firm, we have the buyer and seller sign a document promising to re-prorate in this situation. In this case, it may be best to contact your Realtor first so they can discuss the matter with the seller’s Realtor.
Best of luck in the new home! Don’t forget, to be eligible for the tax benefits of homestead, you need to declare this house as your homestead with mailing address, driver’s license and the like by Jan. 1, and apply prior to March 1, 2016, for the exemption through the property appraiser.
Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.